US Airways and American Airlines completed a merger in December of 2013 to form the American Airlines Group (AAL), becoming the world’s largest airline in the process. The deal, worth more than $11 Billion ($8 billion less than the WhatsApp acquisition, for those keeping track) joined the two fleets, unions, contracts, and staffs to form one mega-airline. The group will operate almost 6,700 flights per day to 50 countries and 330 destinations. Although its stock has risen since the merger, the American Airlines Group stock price has still not increased to expected levels.

Since 2001, 10 major airlines have merged into 4 large US international carriers. American Airlines, United (UAL), Delta (DAL), and Southwest (LUV) control 85% of the US market. Some of the major mergers include Delta’s 2008 merger with Northwest Airlines, and United Airlines’ merger with Continental in 2012, which made it the world’s largest carrier at the time. The lack of competition within the airline industry gives carriers great power over their customers, such as setting above market ticket prices.

In fact, aware of inevitable price manipulation, the US Department of Justice filed a lawsuit to block the US Airways-American Airlines merger because of how much power the company would obtain. The two airlines competed for control of over nearly 1,000 routes around the nation. Thus, a US Airways-American Airlines merger would result in a drastic decrease in competition. With its new power, the American Airlines Group chose to alter flight routes, most notably creating 44 new flights from Washington National and eliminating 12 flights from LaGuardia. In doing so, the American Airlines Group was able to manipulate prices to higher levels. Knowing it was subject to potential government intervention, the American Airlines conglomerate agreed to sell some of its gate slots at LaGuardia, however they were bought by Southwest, one of the other 4 major airlines.

As customers, these massive mergers are not in our interests. Although the two companies will continue to thrive as one (and avoid bankruptcy), the power they will undoubtedly wield will force customers to pay higher prices in all purchasing aspects. Unlike other notable mergers, the US Airways-American Airlines merger will not force massive layoffs, and payable wages will remain relatively similar – meaning that profit margins must increase. This will happen by cutting the number of offered flights, to create artificial demand, and by raising ticket prices.

Since airlines operate on an unprecedentedly low 1% profit margin, these companies must find new ways to differentiate themselves from their competition. Ultimately, it is in the consumer’s interest for airlines to follow business models similar to those of Southwest. Throughout the recession, Southwest was able to keep its ticket prices low, while not compromising many of its services; instead, they designed their business model to cut costs elsewhere. For example, Southwest only operates one type of aircraft, the Boeing 737. This means they need only inventory 737 parts and need only train their pilots to fly one type of aircraft. Southwest has found many ways to cut its employee and operating costs, which in turn has allowed it to charge competitive ticket prices.

Ultimately, if you want to fly, it’s getting harder and harder to do so cheaply. With the concentrated power that is held by four major airlines, ticket prices will inevitably rise. It’s also important to remember that, at the end of the day, airlines are public businesses forced to maximize shareholder return. To do this, they must find ways to cut their costs and increase profit margins; unfortunately, the easiest way to do this is by raising ticket prices.

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